might look like but will it actually do anything to cut the deficit? and what happens nay don't get a deal? we'll hear from two senators who have been working together on deficit reduction, assistant majority leader dick durbin of illinois, and senator tom coburn of oklahoma. then we'll look forward to 2013 with an all-star panel include peggy noonan of the "wall street journal." dee dee myers of "vanity fair." "time" magazine's executive editor michae michael duffy, and also "time" columnist joe klein. and we'll hear from major garrett and nancy cordes. >> you going to get a deal today, sir? >> hope so. >> o'donnell: it's all ahead because this is "face the nation." captioning sponsored by cbs from cbs news in washington, "face the nation" with bob schieffer. substituting for bob schieffer, cohost of "cbs this morning,"

norah o'donnell. >> o'donnell: good morning, again. tom coburn and dick durbin are here, and we'll turn to both of you in just a moment. but we want to start with some new information from chief white house correspondent major garrett and congressional correspondent nancy cordes who are here. i know you have both been speaking with your sources this morning, and, nancy, what's the latest? >> reporter: nora, democrats will at this point are very pessimistic that leader reed and leader mcconnell will be able to strike that deal that they were so hopeful about 24 hours ago. the two staffs worked late into the night. they trade proposals will back and forth but democrats tell us they are just still too far apart on taxes. democrats was soset the limit at $250, 000, let the tush of bush tax cuts expire for people making more than that. republicansment that limit to be higher, and they're also far apart on estate taxes. they will meet with their caucuses later today and at that point we expect they're going to

tell their members they just weren't able to make out a deal on this. >> o'donnell: major, you have been talking to the white house. >> reporter: the fiscal cliff preoccupation hab about taxes but there's another part, across-the-board cuts, and they are preparing to send out furlough noticees, and apply want quester. >> o'donnell: the white house is preparing to do that? >> reporter: it that's. because the deadline is approaching. it cannot reasonably ignore the law, and misapplying. so it is now preparing to send out a variety of notices to federal contractors, the contract is suspended or canceled. or to tell various agency the-- the t.s.a., f.a.a., all through the federal government, lay people off, this is real, because they seaport negotiations are not getting anywhere near a deal and they have to prepare for the cutting side of the fiscal cliff, not just the taxes. >> o'donnell: and, nancy, if there is no deal, what happens next on monday? >> reporter: essentially we

move to plan b, where senates democrat introduce their own plan in the senate that caps the bush tax cuts ap at $250,000 or less, extends long-term unemployment benefits, maybe imposing spending cuts to push off the sequester for six months or a year and we see if the republicans allow a straight up-or-down votes that only requires 50 senators to vote yes or if we have to go to a 60-vote threshold. democrats think they can get the seven republicans they need-- they think they might be able to get up to 10 who have signaled they could go along with something like this. that's not the end of the road. even if it passes, it has to go to the house and that's a tricky road as well. >> o'donnell: let's turn now to our senators who are here. senator durbin, you're the number two senator on the democratic side. how far apart are you with the republicans to reach a deal? >> well, i think there still is a chasm there. there's work to be done and not

much time left. it's interesting that it does come down to two very basic issues-- one is what percentage of the wealthiest people in america will pay a higher tax eat. and secondly, how many of the richest americans who pass away should be spared paying extra for estate taxes. from the republican side, those remain their highest priorities -- protecting object highest income individuals from tax increases and protect up to 6,000 estates a year from pagan additional $1 million. that's what this is about. we see it differently. what's at stake as far as we're concerned are 98% of the american families, working families and middle-income families with shouldn't see their taxes go up on january 1. that's our highest priority. als the president added, the two million who would lose unemployment benefits immediately if we don't act to change that between now and the deadline. >> o'donnell: so you say there's a chasm. you don't think there will be a deal today? >> i won't go that far. i have been around washington

long enough to know it takes a deadline, it takes a lot of get a lot of worry when people reach a point and say, "reporter, let's find a way through this." it has happened before and it could happen again. >> o'donnell: are the democratic defensemans willing to raise the threshold from 250,000 to 400,000. >> each time you raise it we add more to the deficit of what we're going to face down the road. time you decide you're going to protect the higher income americans from paying more taxes it imposes more of a burden to cut spending, reduce expenditures in medicare and other areas. becomes very problematic for a lot of working family. >> o'donnell: senator coburn, what are you hearing from your republican leader? he of has he come up with a deal? >> we haven't heard anything, just minimal in terms of what's going back and forth. i think they're far apart. i don't think anybody knows what's going to happen. the odds are that we've not seen

the leadership on either side of aisle to solve this problem, and why would we think we're going to see the leadership in the next 24 hours to solve the problem? but i would take issue with dick-- the characterization is we're the-- no matter where we raise taxes, what's going to happen to the money? we're going to grow the government with it. we're not going to reduce the deficit because we refuse to solve the bigger problems like saving medicare, insuring social security disability. we're not going to use that money to do anything except continue to grow the government. so the characterization is that we're-- what we're wanting to do is to make sure we have a dynamic economy, and i have no problems -- i've been out there for a long time with saying those that are making more ought to contribute more. but where does the money and g? and what do do you with the money? do you do something with the money that will actually get us further down the road and fix our ultimate long-term problem,

which is we're bankrupt. and we went off the cliff two years ago when we covered 90% of our debt to g.d.p. and by the way, if you look at it the way of other country, our debt to g.d.p. is 120%, not 90%, not 100%, it's 120%. one last fact it's average greek citizen debt for their country is 36,000. we're at 51,000 per person in this country. we're becoming greece, and we have a government that we're willing to pay the taxes for 65% of the cost of it. we need to change that. we need both, both-- we need to do both. >> o'donnell: i'm flawed brought thaglad you brought that up. we're not even there. we're just dealing with this little short-term patch that you can't even get an agreement on. what does that say about what's happened here in washington and

a real lack of confidence among the american people that it the body you guys serve in is just broken? >> well, it is, and it needs to change. this conservative republican, this progressive carriage we both voted for it. we worked on this for three years. there is room for compromise and agreement. here's what we ran into the problem with. 40% of deficit reduction in the sim son-bowles came from additional revenue, 40%. when we said to speaker boehner you have to come up with revenue, he said i'll come up with a plan that protects those making less than $1 million. he couldn't silent republican caucus. the only way we deal with this cries and the deficit is on a bipartisan basis. this can't be done exclusively democratic senate, exclusively republican in the house. it will never work. >> o'donnell: both of you are also part of the gang of eight air, group of senator senators that many people look at and say these are the grown-ups in the youth senate in terms of looking at real ways to reduce deficit.

but with all due respect, why haven't you ever put pen to paper and put anything forward and rally people around your proposal? >> we put to paper many times and we have ideas that we think could be parent of the ultimate answer here in terms of deficit reduction. none of it is easy. i don't want to mislead you. it's not easy. we float some of the concepts and some of the ideas and they've had some tractions. want premise is, if we're going to follow simpson-bowles as a starting point we need revenue as a starting point. that has been a breakdown issue with bane and the house of representatives. until we get beyond that, perhaps beyond the cliff, we can't are an honest discussion. >> o'donnell: senator coburn, on the issue of increased revenue, downing boehner is part problem? senator reid said he's running a dictatorship? >> i don't think so at all. the frustration in the house-- and i'm not known as a no

non-conservative-- they passed a lot of things there has not been action on in the senate, and that's the majority leader's prerogative. but if you take it and bend it to the will of the senate and send it back, that's how you get compromise. to not move dismingz not ever establish the process-- i think speaker boehner has done a good job in the members he has. i think they maid mistake in not supporting plan b. we would have modified it and sent it back and then they would have had it make a decision on it. the basic fact is the government is twice the size it was 11 years ago. and nobody in washington is doing anything to fix the growth of government to where we have one that we can afford. un, we're going to have to grow at 8%, 9%, if we think we can outgrow it. that isn't going to happen. we have to do the things we have to modernize medicare. we have to achieve real save that is won't change health care but will actually save some money.

>> o'donnell: do you think there's an advantage to going over the fiscal cliff? >> i think there are a couple of advantages. therthere are a lot of disadvantages. one of the advantages is the american people will see what the real cost of their government is the actual real cost for the very wealthy, the very, very low will have minimal impact on. it's about $200 a year. for the very, very wealthy-- that's one of my criticisms of the tax cut. one of the things we did in the simpson-bowles was a reform of the tax cuts. what people don't realize is the well-connected, well-heeled in this country take most of the advantages of the all the deductions and all the giveaways in the tax code. to reform, that would redirect capital which would generate growth which would generate more revenue. unless you reform the tax code in a way that will create capital formation, you're not going to do anything. raising taxes doesn't do that. >> o'donnell: why should there be any confidence you'll ever

get this done? the idea you'll have a small fix, if you even get that here? you'll continue to have the budget battles in 2013. this won't deal with equivalent spending issues. it won't deal with entitlement reform, tax reform, all the hard issues ---- it won't even deal with the debt ceiling. you'll have to fight this again in 2013. >> the president is to this. he proposed a plan to speaker boehner for real deficit reduction and unfortunately that negotiation fell apart. tom and i believe, honest to goodness, if we come to grips with this deficit issue, come up with a responsible, bipartisan answer to it, it will not only put our fiscal house closer to being in order, it will spring this economy forward. take a look around the world. where would you invest in the world? what is the best world currency? even with all our problems it's stimulate u.s. dollar. think of what it would be if there were confidence we were dealing with our debt, that we came to grips with it on a bipartisan basis. that will trigger the kind of

growth, business creation, job creation that i think will help us ultimately resolve our deficit issues and the wealth problems we have in this country. >> o'donnell: i want to show both of you and remind our viewers a pie chart which terribly shows our federal budget and where we spend our money because i think it's important to know where the money goes, taxpayer money. and you look at it, and just about half goes to entitlements. and then you see education in green is just a small chunk of what we spend money on. and the defense is a large chunk as well. i have to ask you, senator durbin, because you have said, even in a grand bargain, that we shouldn't be tackling entitlements. how you can be serious about deficit reduction if you're not willing to take on medicare? >> norah, i tackled them with simpson-bowles. we need to taxle them again. what i said in the last few hours of the fiscal cliff don't make program policy changes in medicare that you're going to live with decades reflect on

this. yesterday 10,000 americans reached the age of 65, today another 10,000, tomorrow another 10,000, and every day for the next 18 years. these people have pied in to fair lifetime into an insurance program called social security and medicare and they are expecting the benefits they paid for. we have to resolve, as tom said, how are we going to come to grips with the growing health care costs in medicare and medicaid and still keep our promise to these people? so, yes, we need entitlement reform. let's do it in a calm, thoughtful way using something like simpson-bowles to come up with 75-year solvency. >> o'donnell: another thing, the pew economic policy group did a study this week how much it will cost to make all these tax cuts permanent again. if you did all of them, it would be $3.1 trillion over the next 10 years. it was just the tax cuts for those making under $250,000. we're looking at additional $2.3 trillion. i mean, democrats are willing to go along with those for under

$250,000, and that's a big expense, or cost, or loss of revenue, however you want to look at it. how you can vote for those and not have spending cuts? >> you can't. >> o'donnell: so on monday if it gets down to plan d., what nancy called plan d., where you just have to vote to extend the tax cutes, would you vote for that? >> it depends what the deal is and what's in it. a couple of point. s. one is, we have a government that we refuse to pay for. that's number one. number two, the average couple in medicare pays in $110,000 during their lifetime of taxes and takes out $350,000. today, the people on social security in real dollars will take $21 trillion more out of social security than they paid in, $21 trillion more than they paid in. the question is it-- it goes

back to what thomas jefferson said-- never design program, never create a government program with which you have not played of laid a tax to pay for it. >> o'donnell: or a war? >> or a war. i have not vote forward one defense supplemental bill since i've been in the senate because it wasn't paid for. we didn't make hard choices. we delayed hard choices. that's what the congress is doing now. going back to your earlier point. the reason people are upset with congress and senate the senate is because we make decisions based on what is in the best interest of our politics not in the best interest of the country. and so there's this lack of trust that we will do what's in the best interest of our country, even if it hurts us politically. and that's called leadership. and we don't see much of that. and that's not a partisan statement. that's both sides. when we look at a parochial interest more important than the interest of the nation, which is exactly the opposite of why the senate was createed in the first place, why we had a bicamera

legislature. you see why we have such low esteem in voters. >> o'donnell: you both served with nebraska senator chuck hagel who has been it named for it defense. >> you cannot vote for him because of the statements he's made. >> i think he has proven his patriotism, and public service. two purple hearts in vietnam. this man deserves more than just a hearing. he deserves the respect for the service he's given our country in the and the senate and to disqualify film hear statements made-- i think he at least deserves a hearing and an opportunity. >> that's not the only reason to disqualify him. he does not have the experience to manage a very large organization like the pentagon. and we've actually had-- i think leon pa98 has done a wonderful job. i supported his nomination.

he did have a lot of experience prior to coming here. and if there's a place we need great management, it's the pentagon, and a great manager. >> o'donnell: senators coburn and durbin, good luck today. >> thank you. >> o'donnell: a busy day this sunday. >> we actually had breakfast together. >> o'donnell: i think the american people wish you luck, too, with your gang of eight. we'll be right back. for an idea. a grand idea called america. the idea that if you work hard, if you have a dream, if you work with your neighbors... you can do most anything. this led to other ideas like liberty and rock 'n' roll. to free markets, free enterprise, and free refills. it put a man on the moon

and a phone in your pocket. our country's gone through a lot over the centuries and a half. but this idea isn't fragile. when times get tough, it rallies us as one. every day, more people believe in the american idea and when they do, the dream comes true. we're grateful to be a part of it. >> o'donnell: and we're back with more from chief white house counter major garrett, and congressional correspondent nancy cordes. you just heard the two senators there. nancy, did that make you more or less optimistic about a deal today? >> reporter: it seems like they are both sort of accepting at this point are even though they don't want to preempt the pressure they don't want to say right now it looks like it's not working out, but they both seemed pretty resigned to the fact that the most likely scenario is democrats are going to bring up their own package as early as tonight, more likely

tomorrow, and then we're just going to have to see what happens. i think there was a good-faith effort on the part of the leaders to try to get this done. it wasn't all for show. but they did need to prove that they were trying to do something. and at the end of the day, it's just too difficult for republicans, most republicans to have their fingerprint on a plan that eliminates tax cuts for some people. this is just an easier way for them. >> o'donnell: what happened, major? the president did signal he was willing to go up to 400,000, possibly, as a threshold on friday then in the briefing room, he said 250,000 again, and he suggested this plan d., as nancy has outlined, on monday, where there would be an up-or-down vote. some something you think ends up happening? what will white house say about that? >> for the white house the idea of going up to $400,000 and doing something else on federal benefits, reducing the annual cost of living adjustments to

what is called the consumer price index, the president made those concessiones, two large post-reelection concessions the president made but they were the part of a much bigger deal. as the deal shrinks, the president sees it as largely a political exercise. hthe administration, all of source vitaly me, 400,000 was part of the larger deal. you get away from the desert shield, to the smaller patch arrangement where we don't talk about the debt ceiling, they're not interested in make those kinds of concessions. they would be willing to make them if there was a larger deal with greater scope and longer term implications for the federal deficit. without that, they're going to play the hard politics game and say to republicans we dare you to go over the cliff and have an inherent, most of the political responsibility for doing so. >> o'donnell: that's interesting. i've always struggled with what

is the political upside for the president to strike a short-term deal? >> well, a short-term deal only benefits the president if the understanding of the fiscal cliff is real and the consequences of it are thoroughly understood. i don't think there's a lot of evidence in the country yet that that's true. you have a couple saying it might not be such a bad idea to go over the cliff. it might concentrate the mind further. the president reluctantly send this idea, the budget control act, all the deadlinees deadlinees, as part of a long, tortuous negotiation. he now regards the negotiating process as largely a mistake and will never negotiate again on the debt ceiling. >> but the benefit for everyone, democrats and republicans of voting on something before the deadline, is that the stock market has now gone down five days in a row. we are now below 13,000. nobody knows what is going to happen on january 2 if there's no deal. the markets might not react very

much. they might take a huge hit, and no one wants to be responsible for that. >> the market cares most about the debt ceiling and defaulting. if you talk to all of the big business leaderes, the various organizations that have come to the white house and also gone to capitol hill, their largest concentration is can we resolve our long-term deficit situation and develop the some sort of peace agreement and cease-fire on defaulting on the good faith and credit of the federal government. that's not even on the table right now. i think the market reaction is going to be negative even if there is a small deal. >> o'donnell: look what will happen if a deal is not made. the bush tuctz will expire and most taxpayers will see a rate increase. if you're a couple making over $50,000, that could mean $2200 more. capital games taxes, dividend taxes, estate taxes will all go up. everyone will see a 2% cut in your paycheck, since the payroll tax cut will expire. for every american that's about a $940 decrease in your annual

takehome pay. we're talking about the child tax credit, the marital it penalty fixes, and on january 2, the stock market as you talked about, reopens, and the federal government reopens which means the sequestration kicks in. $110 billion in spending cuts a year for the next 10 years. that's a 9% cut in defense and 8% cut in domestic spending. and then we're not finished because january 7, that week, 2.1 million people will stop receiving their unemployment checks. all in all, economists say this could mean 3.4 million jobs lost and unemployment could reach 19.1% by the end of the 2013, and the u.s. will enter another recession, and yet congress can't get anything done >> there is a little bit of a cushion there. the i.r.s. didn't expect that we would get to this point. they thought congress would work something out, so it's not as if people's paychecks are going to see higher withholdings on january 1. it's going to take a few weeks

for that to kick in. so if congress doesn't work out a deal by the deadline but can figure out something shortly thereafter, there is a chance that people won't see an increase. >> o'donnell: major garrett and nancy cordes, thank you so much. and we will be right back. (all) the gulf! it doesn't matter which of our great states folks visit. mississippi, alabama, louisiana or florida, they're gonna love it. shaul, your alabama hospitality is incredible. thanks, karen. love your mississippi outdoors. i vote for your florida beaches, dawn. bill, this louisiana seafood is delicious. we're having such a great year on the gulf, we've decided to put aside our rivalry. now is the perfect time to visit anyone of our states. the beaches and waters couldn't be more beautiful. take a boat ride, go fishing or just lay in the sun. we've got coastline to explore and wildlife to photograph. and there's world class dining with our world famous seafood.

so for a great vacation this year, come to the gulf. its all fabulous but i give florida the edge. right after mississippi. you mean alabama. say louisiana or there's no dessert. this invitation is brought to you by bp and all of us who call the gulf home. [ buzzing ] bye dad. drive safe. k. love you. [ chirping, buzzing continues ] [ horn honks ] [ buzzing continues ] [ male announcer ] the sprint drive first app. blocks and replies to texts while you drive. we can live without the &. visit sprint.com/drive. you have a plan? first we're gonna check our bags for free, thanks to our explorer card. then, the united club. my mother was so wrong about you.

next, we get priority boarding on our flight i booked with miles. all because of the card. and me. okay, what's the plan? plan? mm-hmm. we're on vacation. there is no plan. really? [ male announcer ] the united mileageplus explorer card. the mileage card with special perks on united. get it and you're in. >> o'donnell: some of our stations are leaving us now, but for most of you we'll be back with our political roundtable. stay with us. ,,,,,,,,,, q/z

the captioning on this program is provided as an independent service of captionmax, which is solely responsible for the accurate and complete transcription of program content. cbs, its parent and affiliated companies, and their respective agents and divisions, are not responsible for the accuracy, or completeness of any transcription, or for any errors in transcription. closed captioning provided by cbs sports division